A stand-alone garage for a company car does not limit tax depreciation — but not all costs are 100% deductible

Paweł Gorzelec
2 hours ago
4 min read

For several years, Polish income tax rules have limited how much of the expenses related to passenger cars used for both business and private purposes (“mixed use”) can be recognized as tax-deductible costs. While tax authorities and administrative courts have largely settled how this cap works for typical car expenses, edge cases still appear. One recent case concerned a stand-alone brick garage purchased solely to store a mixed-use company car.

A sole proprietor using a passenger car under an operating lease (for both business and private purposes) asked whether she could:

enter a newly purchased detached garage into the fixed-asset register and deduct depreciation, and
recognize running and maintenance costs of that garage (utilities, real-estate tax, admin/HOA fees) as tax-deductible.

She assumed depreciation should be deductible proportionally to business use of the car and that current expenses should likewise be recognized proportionally.

KIS outcome: “incorrect” — but favorable to the taxpayer

KIS held that the taxpayer’s view was incorrect, yet the result turned out beneficial:

Since the garage is entered into the register of fixed assets, the taxpayer may depreciate its initial value and recognize 100% of depreciation charges as tax-deductible. The typical “car-expense cap” does not apply to depreciation of the garage itself.Important: When determining the initial value, remember that land is not depreciable under Polish PIT rules.
For repairs and maintenance performed on the garage, the decisive factor is the nature of the works:
- Repairs/maintenance (restoring original condition, e.g., repainting, fixing the door, routine servicing) are current expenses and may be expensed directly (generally 100%).
- Improvements (that increase utility, capacity, or useful life — e.g., adding an automatic door that materially enhances functionality) must be capitalized by increasing the asset’s initial value and then deducted through depreciation.
For operating and upkeep costs connected with storing a mixed-use vehicle — electricity, real-estate tax, admin/HOA fees, cleaning — the 75% deductibility cap applies. That is, only 75% of such expenses can be recognized as tax-deductible.
All expenses must be economically justified and properly documented to support the link with business activity.

Practical guide for entrepreneurs

Before adding the garage to fixed assets

Ensure the garage is complete and ready for use at the time of recognition.
Determine the initial value (exclude land).
Select an appropriate depreciation method and rate in line with the Polish Classification of Fixed Assets (KŚT).
Prepare supporting documentation (purchase deed/invoice, acceptance protocol, photos/plans if useful).

How to classify garage-related expenditures

Repairs / maintenance → current expense (tax-deductible directly, typically 100%).Examples: repainting walls, fixing minor defects, replacing bulbs, servicing the door.
Improvements → capitalize (increase initial value) → depreciate over time.Examples: installing advanced automation that increases utility, structural extension, thermal modernization significantly enhancing performance.

Where the limits actually bite

Depreciation of the garage: 100% deductible (no “car cap”).
Operating & upkeep (linked to storing a mixed-use car): 75% deductible (electricity, property tax, admin/HOA fees, cleaning).
Land value: non-depreciable (never included in depreciation base).

Documentation & compliance tips

Keep invoices and contracts for purchase and works; use clear descriptions of the garage’s business purpose (vehicle storage for business activity).
For works on the garage, keep work scopes, acceptance protocols, and photos to evidence whether something was a repair vs an improvement.
If multiple functions exist (e.g., part storage), document the primary purpose and the link to income generation.
Apply the 75% cap consistently to operating costs as long as the stored car remains mixed-use.

Short examples

Painting the garage interior after wear and tear → repair/maintenance → direct expense (generally 100%).
Adding a motorized sectional door with smart access that materially improves functionality → improvement → capitalize and depreciate.
Monthly electricity bill for lighting/door operation → operating cost → 75% deductible due to mixed-use link.
Real-estate (property) tax for the garage → operating/upkeep cost → 75% deductible.

FAQ

Does the 75% cap also cover the garage’s property tax?

Yes. Property tax is part of upkeep tied to storing a mixed-use car, so only 75% is deductible.

What about insurance for the garage building?

Typically treated as upkeep/operating cost, so 75% applies (when the garage’s role is storing the mixed-use car).

Do I need to track a custom business/private ratio for the garage?

Not for depreciation (it’s 100% deductible). For operating costs, the rules impose a statutory 75% cap in mixed-use scenarios — you don’t compute a bespoke ratio.

If I later use the car exclusively for business (no private use), can I deduct 100% of operating costs?

Switching to exclusive business use changes the landscape for car-related limits. Ensure you meet the formal requirements (e.g., appropriate documentation/logs where applicable). Then operating costs of the garage connected to the car’s storage may be recognized without the 75% cap — provided the mixed-use condition no longer applies and the legal requirements are satisfied.

Bottom line

A detached garage recorded as a fixed asset can be depreciated in full (100%)—storing a mixed-use car there does not reduce depreciation deductibility. However, be careful with operating and upkeep costs, which are generally capped at 75% due to their link to a mixed-use vehicle. Correctly distinguish repairs/maintenance from improvements, and keep robust documentation to defend your tax position.

Legal basis:

Individual tax ruling issued by the Director of the National Revenue Information Service (KIS) dated 29 August 2025, ref. no. 0114-KDIP3-2.4011.679.2025.2.MT.